others used for customs clearance. To protect against fraudulent documentation, it
may be necessary to scrutinize transactions through physical cargo inspections as
actors may attempt to circumvent sanctions by concealing the true nature of the
goods or their intended destinations.
To hedge against the risk of breaching sanctions in the vessel chartering contexts,
shipowners and charterers have begun including special ‘sanctions clauses’ in their
charterparty contracts. Industry organizations, such as the Baltic and International
Maritime Council (BIMCO) and Intertanko have published model clauses designed
to allocate such risks.
59 These normally shift the risks away from the shipowner and
onto the charterer who is responsible for directing the vessel’s commercial undertakings.
60 Such provisions may be added to standard charterparty forms under a
‘rider’ clause. However, sanctions clauses are also already included in some of the
most recent wholesale updates to the BIMCO charterparty form contracts.
61 Such
provisions allow a shipowner to refuse orders of a charterer if it believes the orders
would subject it to liability for breaching sanctions.
Sanctions tactics enhancing state authority to inspect vessels can also raise the
possibility of expensive diversions, detentions and commercial delays. Recent
sanctions, particularly towards North Korea, provide robust authority and responsibility for state actors to engage in vessel inspections both in their territorial waters
and even on the high seas with consent of the flag State.
62 While the burden of
inspection enforcement remains on UN Member States and their coast guards,
navies, and other agencies, it is commercial actors who bear the risk of vessel delays
and cargo seizures that could result from such inspections. To protect against these
losses, industry participants must not only remain in clear communication with
coastal authorities for inspection purposes, but also anticipate these challenges by
allocating the risk of delays through express contract provisions and special trade
disruption insurance products.
The prohibitions on renaming and reregistering vessels appears to be an obligation falling squarely on UN Member States. Indeed, this is the case for registries
operated under Member State government agencies. Singapore, China, and Hong
Kong, for example, are all major flags States that utilize governmental offices to
oversee vessel registration within their jurisdictions. For instance, the Singapore
Registry of Ships is an organ of the Maritime and Port Authority of Singapore, which
is a public entity operated by a UN Member State.
63 But some other major flags,
particularly the flags of convenience selected by maritime businesses to reduce
59 Stuhrmann (2019).
60 See e.g. BIMCO, Sanctions Clause for Time Charter Parties (2020); BIMCO, Sanctions Clause
for Voyage Charter Parties (2020).
61 See e.g. New York Produce and Exchange Time Charter 2015, Cl 46.
62 Kraska (2019), Allen (2019) and Mclaughlin (2002).
63 See Singapore Registry of Ships, Maritime and Port Authority of Singapore, https://www.mpa.
gov.sg/web/portal/home/singapore-registry-of-ships.
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R. L. Kilpatrick
may be necessary to scrutinize transactions through physical cargo inspections as
actors may attempt to circumvent sanctions by concealing the true nature of the
goods or their intended destinations.
To hedge against the risk of breaching sanctions in the vessel chartering contexts,
shipowners and charterers have begun including special ‘sanctions clauses’ in their
charterparty contracts. Industry organizations, such as the Baltic and International
Maritime Council (BIMCO) and Intertanko have published model clauses designed
to allocate such risks.
59 These normally shift the risks away from the shipowner and
onto the charterer who is responsible for directing the vessel’s commercial undertakings.
60 Such provisions may be added to standard charterparty forms under a
‘rider’ clause. However, sanctions clauses are also already included in some of the
most recent wholesale updates to the BIMCO charterparty form contracts.
61 Such
provisions allow a shipowner to refuse orders of a charterer if it believes the orders
would subject it to liability for breaching sanctions.
Sanctions tactics enhancing state authority to inspect vessels can also raise the
possibility of expensive diversions, detentions and commercial delays. Recent
sanctions, particularly towards North Korea, provide robust authority and responsibility for state actors to engage in vessel inspections both in their territorial waters
and even on the high seas with consent of the flag State.
62 While the burden of
inspection enforcement remains on UN Member States and their coast guards,
navies, and other agencies, it is commercial actors who bear the risk of vessel delays
and cargo seizures that could result from such inspections. To protect against these
losses, industry participants must not only remain in clear communication with
coastal authorities for inspection purposes, but also anticipate these challenges by
allocating the risk of delays through express contract provisions and special trade
disruption insurance products.
The prohibitions on renaming and reregistering vessels appears to be an obligation falling squarely on UN Member States. Indeed, this is the case for registries
operated under Member State government agencies. Singapore, China, and Hong
Kong, for example, are all major flags States that utilize governmental offices to
oversee vessel registration within their jurisdictions. For instance, the Singapore
Registry of Ships is an organ of the Maritime and Port Authority of Singapore, which
is a public entity operated by a UN Member State.
63 But some other major flags,
particularly the flags of convenience selected by maritime businesses to reduce
59 Stuhrmann (2019).
60 See e.g. BIMCO, Sanctions Clause for Time Charter Parties (2020); BIMCO, Sanctions Clause
for Voyage Charter Parties (2020).
61 See e.g. New York Produce and Exchange Time Charter 2015, Cl 46.
62 Kraska (2019), Allen (2019) and Mclaughlin (2002).
63 See Singapore Registry of Ships, Maritime and Port Authority of Singapore, https://www.mpa.
gov.sg/web/portal/home/singapore-registry-of-ships.
170
R. L. Kilpatrick